Gold tumbles 1 % to below $1,700 on technical selling

Gold tumbled more than 1 percent on Thursday on stop-loss selling, after the Federal Reserve's announcement of a fresh round of bond buying pushed prices to their highest levels in nearly two weeks.

The most-active U.S. gold futures contract lost as much as 1.3 percent to $1,695.5 an ounce, while spot gold dropped 1 percent to $1,694.16.

The Federal Reserve announced the plan to purchase $45 billion in longer-term Treasuries each month on top of the $40 billion monthly buying of mortgage-backed securities, as expected, but set inflation and unemployment threshold for exit strategy.

After the announcement gold rose to above $1,720, highest since November 30.

"That provided a good chance for people to liquidate their positions," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

Gold will remain range bound between $1,660 and $1,730 in the near term, since the Fed's move was largely in line with market expectation, he said.

The thinning liquidity in the market towards the year end also contributes to the volatility, traders said.

Spot gold stood at $1,696.16 by 0144 GMT.

U.S. gold traded at $1,697.80, with more than 16,000 lots changing hands, compared to about 3,000 an hour earlier.

U.S. silver fell more than 2 percent to $32.79 an ounce, before paring losses to stand at $32.96.

In other news on the U.S. economy, the "fiscal cliff" talks could drag on past Christmas as sharp differences remained between congressional Republicans and the White House on how to avert steep tax hikes and budget cuts.

Holdings of gold-backed exchange-traded funds edged lower to 76.076 million ounces on December 11, easing from a record high of 76.187 million ounces last week.